exv10w10






Exhibit 10.10



No. 1650-0067



PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT




between

LEBANON MUTUAL INSURANCE COMPANY

and

MUNICH REINSURANCE AMERICA, INC.




 









 






No.
1650-0067



TABLE OF CONTENTS




	 	 	 	 	 	 	 
	ARTICLE	 	 	 	PAGE
	 
	 
	 	 	 	 	 	 
	I

	 	BUSINESS COVERED
	 	 	1	 
	 
	 	 	 	 	 	 
	II

	 	EXHIBITS COVERED
	 	 	1	 
	 
	 	 	 	 	 	 
	III

	 	COMMENCEMENT AND TERMINATION
	 	 	2	 
	 
	 	 	 	 	 	 
	IV

	 	TERRITORY
	 	 	2	 
	 
	 	 	 	 	 	 
	V

	 	EXCLUSIONS
	 	 	2	 
	 
	 	 	 	 	 	 
	VI

	 	DEFINITIONS
	 	 	4	 
	 
	 	 	 	 	 	 
	VII

	 	ULTIMATE NET LOSS
	 	 	6	 
	 
	 	 	 	 	 	 
	VIII

	 	NET RETAINED LINES
	 	 	6	 
	 
	 	 	 	 	 	 
	IX

	 	LOSS NOTICES AND SETTLEMENTS
	 	 	7	 
	 
	 	 	 	 	 	 
	X

	 	SALVAGE AND SUBROGATION
	 	 	7	 
	 
	 	 	 	 	 	 
	XI

	 	OFFSET
	 	 	7	 
	 
	 	 	 	 	 	 
	XII

	 	ERRORS AND OMISSIONS
	 	 	8	 
	 
	 	 	 	 	 	 
	XIII

	 	ACCESS TO RECORDS
	 	 	8	 
	 
	 	 	 	 	 	 
	XIV

	 	TAXES
	 	 	8	 
	 
	 	 	 	 	 	 
	XV

	 	CURRENCY
	 	 	8	 
	 
	 	 	 	 	 	 
	XVI

	 	INSOLVENCY
	 	 	8	 






 









 






No.
1650-0067





	 	 	 	 	 	 	 
	ARTICLE	 	 	 	PAGE
	 
	 
	 	 	 	 	 	 
	XVII

	 	ARBITRATION
	 	 	9	 
	 
	 	 	 	 	 	 
	XVIII

	 	FEDERAL TERRORISM EXCESS RECOVERY
	 	 	10	 







 












 





No. 1650-0067




PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT




THIS AGREEMENT made and entered into by and between LEBANON MUTUAL INSURANCE COMPANY, Cleona,
Pennsylvania (hereinafter referred to as the “Company”) and the MUNICH REINSURANCE AMERICA, INC.,
a Delaware Corporation with Administrative Offices in Princeton, New Jersey (hereinafter referred
to as the “Reinsurer”).



WITNESSETH:




The Reinsurer hereby reinsures the Company to the extent and on the terms and conditions and
subject to the exceptions, exclusions and limitations hereinafter set forth and nothing
hereinafter shall in any manner create any obligations or establish any rights against the
Reinsurer in favor of any third parties or any persons not parties to this Agreement.



ARTICLE I 




BUSINESS COVERED 




A. By this Agreement the Reinsurer agrees to indemnify the Company in respect of the ultimate net
loss which may accrue to the Company as a result of losses occurring during the term of this
Agreement under policies in force at the inception of this Agreement or hereafter issued or renewed
and classified by the Company as Property, with respect to the following lines of business: Fire,
Allied Lines, Inland Marine, Personal and Commercial Automobile Physical Damage, Garagekeepers
Insurance, Farmowners Multiple Peril (Section I only), Homeowners Multiple Peril (Section 1 only)
and Commercial Multiple Peril (Section 1 only).



B. This Agreement is solely between the Company and the Reinsurer, and performance of the
obligations of each party hereto shall only be rendered to the other party. However, if the Company
becomes insolvent, the Reinsurer’s liability shall be modified to the extent set forth in the
INSOLVENCY Article. In no instance shall any insured of the Company or any claimant against an
insured of the Company have any rights under this Agreement.



ARTICLE II 




EXHIBITS COVERED 




The Company will reinsure with the Reinsurer and the Reinsurer shall accept reinsurance from the
Company as set forth in Exhibits A, B and C which are attached hereto and made a part of this
Agreement, such Exhibits being entitled for purposes of identification as follows:




EXHIBIT A — FIRST PROPERTY CATASTROPHE EXCESS OF LOSS

EXHIBIT B — SECOND PROPERTY CATASTROPHE EXCESS OF LOSS

EXHIBIT C — THIRD PROPERTY CATASTROPHE EXCESS OF LOSS



1









 





No. 1650-0067




ARTICLE III 




COMMENCEMENT AND TERMINATION




A. This Agreement shall become effective at 12:01 a.m. Standard Time, January 1, 2008 and shall
continue in force until 12:01 a.m., Standard Time, January 1, 2009.



B. In the event that this Agreement expires while a loss occurrence covered hereunder is in
progress, the Reinsurer shall be liable for its share of the entire loss resulting from the loss
occurrence, subject to the other terms and conditions of this Agreement.



ARTICLE IV 




TERRITORY




This Agreement applies to risks located in the United States of America and its territories and
possessions, except that with respect to Inland Marine and Multiple Peril policies covered
hereunder, the territorial limits of this Agreement shall be those of the original policies when
such policies are written to cover risks primarily located in the United States of America and its
territories and possessions.



ARTICLE V




EXCLUSIONS 




No reinsurance indemnity will be afforded under this Agreement for:



1. All reinsurance assumed.



2. Excess of loss business.



3. Business derived from any Pools, Associations or Syndicates as per the “Pools,
Associations or Syndicates Exclusion Clause” attached hereto.



4. All loss, cost or expense directly or indirectly arising out of, resulting as a consequence of
or related to War. “War”, as utilized herein, shall mean war whether or not declared, civil war,
martial law, insurrection, revolution, invasion, bombardment or any use of military force, usurped
power or confiscation, nationalization or damage of property by any government, military or other
authority.



This exclusion shall apply whether or not there is another cause of loss which may have
contributed concurrently or in any sequence to a loss.



5. Nuclear risk, as per the “Nuclear Incident Exclusion — Physical Damage -Reinsurance Clause
(U.S.A.)” attached hereto.



2









 





No. 1650-0067




6. Accident and health, aviation, casualty, boiler and machinery, ocean marine, fidelity, surety,
and any other lines or classes not specifically covered hereunder.



7. Financial guarantees, insolvency and credit business, or bankers blanket bond.



8. Flood when written as such.



9. Earthquake when written as such.



10. Mortgage impairment insurance and similar kinds of insurance, however styled, providing
coverage to an insured as respects its mortgagee interest in property or its owner interest in
foreclosed property.



11. Difference in conditions insurance.



12. Insurance on growing, standing or drying crops, and timber.



13. Inland marine policies covering railroad rolling stock, animal mortality, jewelers and furriers
block, and manufacturers’ output.



14. Products integrity or products tampering.



15. Underground mining.



16. Oil or gas drilling production rigs.



17. Space and space-related risks.



18. Contingency risks of any kind (e.g. share price, unemployment, computer crime, contract
frustration, legacy, confiscation or expropriation, recourse indemnity, extended warranties, kidnap
and ransom, residual value, equipment value, appraisal value, asset value or similar covers).



19. Seepage and/or pollution and/or contamination and/or debris removal per ISO or AAIS pollution
exclusion attached to the Company’s policies.



20. Insolvency or guaranty funds, as per the “Insolvency Funds Exclusion Clause” attached
hereto.



21. Transmission and Distribution lines.



22. All loss, cost or expense arising out of or related to, either directly or indirectly, any
“NBCR Terrorist Activity” as defined herein, and any action taken to hinder, defend against or
respond to any such activity. This exclusion applies regardless of any other cause or event that in
any way contributes concurrently or in any sequence to such loss, cost or expense.



3









 





No. 1650-0067




1nNBCR Terrorist Activity” shall mean any deliberate, unlawful act that:




	 	a.	 	includes, involves or is associated with, in whole or in part, the use
or threatened use of, or release or threatened release of, any nuclear, biological,
chemical or radioactive agent, material, device or weapon except where the Company can
demonstrate to the Reinsurer that such activities or threats thereof were motivated solely
by personal objectives of the perpetrator that are unrelated, in whole or in part, to any
intention to






(1) promote, further or express opposition to any political, ideological,
philosophical, racial, ethnic, social or religious cause or objective; or




(2) influence, disrupt or interfere with any government related operations,
activities or policies; or




(3) intimidate, coerce or frighten the general public or any segment of the general
public; or




(4) disrupt or interfere with a national economy or any segment of a national
economy; or




	 	b.	 	includes, involves or is associated with, in whole or in part, the use
or threatened use of, or release or threatened release of, any nuclear, biological,
chemical or radioactive agent, material, device or weapon that is declared by any
authorized governmental official to be or to involve terrorism, terrorist activity or acts
of terrorism.





23. With respect to the Company’s commercial lines policies reinsured hereunder, this Agreement
shall exclude “Insured Losses”, as defined within and covered by the provisions of the Terrorism
Risk Insurance Act of 2005 and any subsequent amendment thereof or any regulations promulgated
thereunder. This exclusion applies regardless of any other cause or event that in any way
contributes concurrently or in any sequence to such loss, cost or expense.



24. The Company’s liability, including all loss, cost or expense, beyond
circumscribed policy provisions, including but not limited to, punitive, exemplary, consequential
or compensatory damages, resulting from a claim of an insured or an insured’s assignee against the
Company, its agent or employees.



25. Insurance or reinsurance loss portfolio transfers of any kind.



ARTICLE VI 




DEFINITIONS 




A. The term “policies” shall mean the Company’s policies, binders and contracts providing




4









 








No. 1650-0067




insurance on the lines of business covered under this Agreement.



B. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by
any one disaster, accident or loss or series of disasters, accidents or losses arising out of one
event which occurs within the area of one state of the United States or province of Canada and
states or provinces contiguous thereto and to one another. However, the duration and extent of any
one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring
during any period of 168 consecutive hours arising out of and directly occasioned by the same event
except that the term “loss occurrence” shall be further defined as follows:




1. As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and
water damage, all individual losses sustained by the Company occurring during any period of
72 consecutive hours arising out of and directly occasioned by the same event. However, the
event need not be limited to one state or province or states or provinces contiguous thereto.




2. As regards riot, riot attending a strike, civil commotion, vandalism and malicious
mischief, all individual losses sustained by the Company occurring during any period of 72
consecutive hours within the area of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly occasioned by the same event. The
maximum duration of 72 consecutive hours may be extended in respect of individual losses
which occur beyond such 72 consecutive hours during the continued occupation of an insured’s
premises by strikers, provided such occupation commenced during the aforesaid period.




3. As regards earthquake (the epicenter of which need not necessarily be within the
territorial confines referred to in the opening paragraph of this section B) and fire
following directly occasioned by the earthquake, only those individual fire losses which
commence during the period of 168 consecutive yours may be included in the Company’s “loss
occurrence.”




4. As regards “freeze,” only individual losses directly occasioned by collapse,
breakage of glass and water damage (caused by bursting of frozen pipes and tanks) may be
included in the Company’s “loss occurrence.”




For all “loss occurrences,” the Company may choose the date and time when any such period of
consecutive hours commences, provided that it is not earlier than the date and time of the
occurrence of the first recorded individual loss sustained by the Company arising out of
that disaster, accident or loss, and provided that only one such period of 168 consecutive
hours shall apply with respect to one event, except for those “loss occurrences” referred to
in sub-paragraphs 1 and 2 above, where only one such period of 72 consecutive hours shall
apply with respect to one event, regardless of the duration of the event.



5









 





No. 1650-0067





No individual losses occasioned by an event that would be covered by 72 hour clauses may be
included in any “loss occurrence” claimed under the 168 hours provision.



C. The term “loss adjustment expense” shall mean the Company’s expenses allocable to losses under
this Agreement, including court costs and allocated investigation, adjustment, (including
independent adjusters expense), and legal expenses. “Loss adjustment expenses” shall not include
office expenses and salaries of officials or employees of the Company (other than salary charges
and travel expenses of the Company’s staff adjusters, fieldmen or other employees while actually
engaged in the settlement of losses under this Agreement) or the Third Party Administrator acting
on behalf of the Company in the investigation, management and settlement of claims with respect to
the business covered hereunder.



ARTICLE VII 




ULTIMATE NET LOSS




A. The term “ultimate net loss” as used herein shall be understood to mean the sum or sums actually
paid by the Company in settlement of losses under policies covered hereunder, including loss
adjustment expenses, as defined in the DEFINITIONS Article. However, in the event of the insolvency
of the Company, “ultimate net loss” shall mean the amount of loss and expense which the Company has
incurred or for which it is liable, and payment by the Reinsurer shall be made to the liquidator,
receiver or statutory successor of the Company in accordance with the provisions of the INSOLVENCY
Article of this Agreement.



B. All salvages, recoveries (including amounts recovered under reinsurances, whether specific or
general, which inure to the benefit of this Agreement) and payments recovered or received
subsequent to loss settlement under this Agreement shall be applied as if recovered or received
prior to said settlement, and all necessary adjustments shall be made by the parties hereto.
Nothing, however, in this article shall be construed to mean that losses are not
recoverable hereunder until the Company’s ultimate net loss has been ascertained.



ARTICLE VIII




NET RETAINED LINES 




A. This Agreement applies only to that portion of any insurance which the Company retains for its
own account, and in calculating the amount of any loss hereunder and also in computing the amount
or amounts in excess of which this Agreement attaches, only loss or losses in respect of that
portion of any insurance which the Company retains net for its own account shall be included.



B. The amount of the Reinsurer’s liability in respect of any loss or losses shall not be increased
by reason of the inability of the Company to collect from any other reinsurers, whether



6









 





No. 1650-0067




specific or general, any amount which may have become due from them whether such inability arises
from the insolvency of such other reinsurers or otherwise.



ARTICLE IX




LOSS NOTICES AND SETTLEMENT




A. The Company shall advise the Reinsurer of all loss occurrences which, in the opinion of the
Company, may result in a claim hereunder and of all subsequent developments which, in the opinion
of the Company, may materially affect the position of the Reinsurer.



B. All loss settlements made by the Company, or by the Third Party Administrator on behalf of the
Company, provided they are within the terms of the Agreement, shall be unconditionally binding upon
the Reinsurer, who agrees to pay all amounts for which it may be liable immediately upon being
furnished by the Company with reasonable evidence of the amount due or to be due.



ARTICLE X 




SALVAGE AND SUBROGATION 




A. The Reinsurer shall be subrogated, as respects any loss for which the Reinsurer shall actually
pay or become liable, but only to the extent of the amount of payment by or the amount of liability
to the Reinsurer, to all the rights of the Company against any person or other entity
who may be legally responsible in damages for said loss. The Company hereby agrees to enforce such
rights, but in case the Company shall refuse or neglect to do so, the Reinsurer is hereby
authorized and empowered to bring any appropriate action in the name of the Company or its
policyholders, or otherwise to enforce such rights.



B. Any recoveries, salvages or reimbursements applying to risks covered under this Agreement shall
always be used to reimburse the excess carriers (from the last to the first, beginning with the
carrier of the last excess), according to their participation, before being used in any way to
reimburse the Company for its primary loss.



ARTICLE XI




OFFSET




The Company or the Reinsurer may offset any balance, whether on account of premium, commission,
claims or losses, loss adjustment expense, salvage, or otherwise, due from one party to the other
under this Agreement or under any other Agreement heretofore or hereafter entered into between
the Company and the Reinsurer.



7









 





No. 1650-0067




ARTICLE XII




ERRORS AND OMISSIONS 




Inadvertent delays, errors or omissions made by the Company in connection with this Agreement
shall not relieve either party from liability that would have attached had such delay, error or
omission not occurred, provided that upon discovery by the Company, the Reinsurer is promptly
notified and immediate corrective action is taken by the Company.



ARTICLE XIII 




ACCESS TO RECORDS 




The Reinsurer shall have the right to inspect at any reasonable time, through its designated
representatives, all records of the Company that pertain in any way to this Agreement.



ARTICLE XIV




TAXES 




The Company shall pay all taxes on premiums ceded under this Agreement. If the Reinsurer is
obligated to pay any taxes on such premiums, the Company shall reimburse the Reinsurer;
however, the Company shall not be required to pay the same tax twice.



ARTICLE XV 




CURRENCY 




Wherever the word “Dollars” or the “$” sign appears in this Agreement, they shall be construed to
mean United States dollars.



ARTICLE XVI 




INSOLVENCY




In the event of the insolvency of the Company and the appointment of a conservator, liquidator or
statutory successor, the reinsurance provided by this Agreement shall be payable by the Reinsurer
directly to the Company or to its liquidator, receiver or statutory successor on the basis of the
liability of the Company under the contract or contracts reinsured. Subject to the right of offset
and the verification of coverage, the Reinsurer shall pay its share of the loss without diminution
because of the insolvency of the Company. The liquidator, receiver or statutory successor of the
Company shall give written notice of the pendency of each claim against the Company on a policy or
bond reinsured within a reasonable time after such claim is



8









 





No. 1650-0067




filed in the insolvency proceeding. During the pendency of such claim, the Reinsurer may, at its
own expense, investigate such claim and interpose in the proceeding where such claim is to be
adjudicated any defense or defenses which it may deem available to the Company, its liquidator or
receiver or statutory successor. Subject to court approval, any expense thus incurred by the
Reinsurer shall be chargeable against the Company as part of the expense of liquidation to the
extent of such proportionate share of the benefit as shall accrue to the Company solely as a
result of the defense undertaken by the Reinsurer. The reinsurance shall be payable as set forth
above except where this Agreement specifically provides for the payment of reinsurance proceeds to
another party in the event of the insolvency of the Company.



ARTICLE XVII 




ARBITRATION 




A. Disputes between the parties that cannot be resolved by compromise, including any controversy as
to the validity of this Agreement, shall be submitted to arbitration.



B. The board of arbitration shall consist of three arbitrators. One shall be appointed by each of
the two parties, and these arbitrators shall choose the third arbitrator. If the two arbitrators
cannot agree on the third arbitrator within 30 days after their appointment, each shall then
nominate three, of whom the other shall decline two, and the decision shall be made between the two
remaining candidates by drawing lots. If either party fails to choose an arbitrator within 30 days
after a written request by the other party to do so, the latter shall choose both arbitrators, who
shall then choose the third arbitrator.



C. The members of the board of arbitration shall be active or retired disinterested
officials of insurance or reinsurance companies. The arbitrators shall be relieved from all
judicial formalities and shall make their decision according to the rules of law and the custom and
usage of the insurance and reinsurance business only. The decision of the board shall be in writing
and shall be based upon a hearing in which oral or written testimony may be introduced without
following strict rules of evidence, but in which cross examination and rebuttal shall be allowed.
The board may request written briefs of the parties as required. The arbitration proceedings shall
be held at the times and places agreed upon by the arbitrators.



D. The majority decision of the board shall be final and binding upon the parties to the
proceedings and not subject to appeal.



E. Each party shall bear the expense of its own arbitrator and witnesses and shall jointly and
equally share with the other party the expense of the third arbitrator and of the proceedings.



9









 





No. 1650-0067




ARTICLE XVIII




FEDERAL TERRORISM EXCESS RECOVERY 




As respects the Insured Losses of the Company for each Program Year, it is hereby agreed that to
the extent the Company’s total reinsurance recoverables for Insured Losses, whether collected or
not, combined with the financial assistance available to the Company under the Act exceeds the
aggregate amount of Insured Losses paid by the Company, less any other recoveries or
reimbursements, (the “Excess Recovery”), a share of the Excess Recovery shall be paid to the
Reinsurer. The payment of the Reinsurer’s share of such excess amounts shall be deemed to be an
amount equal to the proportion that the Reinsurer’s payment of Insured Losses under this Agreement
bears to the Company’s total collected reinsurance recoverables for Insured Losses.



The parties agree that the method set forth herein for determining an Excess Recovery is intended
to be consistent with the United States Treasury Department’s construction and application of
Section 103 (g)(2) of the Act and, to the extent it is inconsistent, it shall be amended to
conform with such construction and application.



“Act” as utilized herein shall mean the Terrorism Risk Insurance Act of 2002 and any subsequent
amendment thereof or any regulations promulgated there under. “Insured Losses” and “Program Year”
as utilized herein shall follow the definitions as provided in the Act.




IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers, have
executed this Agreement this 17th day of January, 2008;




LEBANON MUTUAL INSURANCE COMPANY,





Rollin Rissinger        




And in Princeton, New Jersey, this 8th day of January, 2008.



	 	 	 	 	 
	 	MUNICH REINSURANCE AMERICA, INC.

 	 
	 	
 	 
	 	Vice President 	 





DATED: January 7, 2008



10









 





No. 1650-0067




EXHIBIT A




LEBANON MUTUAL INSURANCE COMPANY

FIRST PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT




 Section 1




LIMIT AND RETENTION




A. The Company shall retain the first $600,000 of ultimate net loss, each loss occurrence. The
Reinsurer shall indemnify the Company for 95% of the amount by which the ultimate net loss exceeds
the Company’s retention, but the liability of the Reinsurer shall not exceed $1,805,000 (being 95%
of $1,900,000) ultimate net loss, each loss occurrence.



B. It is warranted that the Company shall retain net and unreinsured in any way, the remaining 5%
of excess ultimate net loss, each loss occurrence.



Section 2 



PREMIUM 




A. The premium for this Agreement shall be calculated at a rate of 2.27% of the Gross Net Written
Premium income accounted for by the Company during the term of this Agreement on all business the
subject matter of this Agreement, subject to a minimum premium of $131,000.



B. An annual deposit premium of $145,000 shall be paid to the Reinsurer by the Company in equal
quarterly installments of $36,250 payable on January 1, April 1, July 1 and October 1, 2008.



C. Within 60 days after December 31, 2008, the Company shall render to the Reinsurer a statement of
adjusted premium due hereon, calculated as provided in paragraph A. above, and any additional
premium due the Reinsurer or return premium due the Company shall be remitted promptly.



D. The term “Gross Net Written Premium Income” shall mean the Company’s gross written premiums less
return premiums and less premiums paid for reinsurance, if any, which inures to the benefit of the
Reinsurer under this Agreement.



E. 90% of the Company’s premiums under indivisible Farmowners Multiple Peril policies, 70% for
Businessowners policies and 90% of the Company’s premiums under Homeowners Multiple Peril policies
shall be allocated to the perils covered under this Agreement.



1









 





No. 1650-0067




Section 3 




REINSTATEMENT 





	A.	 	In the event of the whole or any portion of the liability under this Agreement
being exhausted by loss, the amount so exhausted shall be automatically reinstated from the
time of the occurrence of the loss.
	 
	B.	 	For each amount so reinstated, the Company agrees to pay an additional premium calculated at
pro rata of the premium paid hereunder as respects the fraction of the limit reinstated and
100% of the annual premium regardless of the unexpired term of this Agreement. Nevertheless,
the Reinsurer’s liability hereunder shall never exceed $1,805,000 (being 95% of $1,900,000)
with respect to each loss occurrence, nor $3,610,000 (being 95% of $3,800,000) with respect to
all loss occurrences during the term of this Agreement.
	 
	C.	 	If, at the time of a loss claim hereunder, the adjusted premium is unknown, the
calculation for reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the adjusted premium is established in accordance with paragraph C. of
Section 2 — Premium hereinabove.





DATED: January 7, 2008

RG/rg





2











 





No. 1650-0067




EXHIBIT B




LEBANON MUTUAL INSURANCE COMPANY

SECOND PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT




Section 1




LIMIT AND RETENTION 



A. The Company shall retain the first $2,500,000 of ultimate net loss, each loss occurrence. The
Reinsurer shall indemnify the Company for 95% of the amount by which the ultimate net loss exceeds
the Company’s retention, but the liability of the Reinsurer shall not exceed $2,375,000 (being 95%
of $2,500,000) ultimate net loss, each loss occurrence.



B. It is warranted that the Company shall retain net and unreinsured in any way, the remaining 5%
of excess ultimate net loss, each loss occurrence.




Section 2




PREMIUM 



A. The premium for this Agreement shall be calculated at a rate of 1.90% of the Gross Net Written
Premium income accounted for by the Company during the term of this Agreement on all business the
subject matter of this Agreement, subject to a minimum premium of $109,000.



B. An annual deposit premium of $121,000 shall be paid to the Reinsurer by the Company in equal
quarterly installments of $30,250 payable on January 1, April 1, July 1 and October 1, 2008.



C. Within 60 days after December 31, 2008, the Company shall render to the Reinsurer a statement of
adjusted premium due hereon, calculated as provided in paragraph A. above, and any additional
premium due the Reinsurer or return premium due the Company shall be remitted promptly.



D. The term “Gross Net Written Premium Income” shall mean the Company’s gross written premiums less
return premiums and less premiums paid for reinsurance, if any, which inures to the benefit of the
Reinsurer under this Agreement.



E. 90% of the Company’s premiums under indivisible Farmowners Multiple Peril policies, 70% for
Businessowners policies and 90% of the Company’s premiums under Homeowners Multiple Peril policies
shall be allocated to the perils covered under this Agreement.




1









 





No. 1650-0067







Section 3




REINSTATEMENT 



A. In the event of the whole or any portion of the liability under this Agreement being exhausted
by loss, the amount so exhausted shall be automatically reinstated from the time of the occurrence
of the loss.



B. For each amount so reinstated, the Company agrees to pay an additional premium calculated at pro
rata of the premium paid hereunder as respects the fraction of the limit reinstated and 100% of the
annual premium regardless of the unexpired term of this Agreement. Nevertheless, the Reinsurer’s
liability hereunder shall never exceed $2,375,000 (being 95% of $2,500,000) with respect to each
loss occurrence, nor $4,750,000 (being 95% of $5,000,000) with respect to all loss occurrences
during the term of this Agreement.



C. lf, at the time of a loss claim hereunder, the adjusted premium is unknown, the
calculation for reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the adjusted premium is established in accordance with paragraph C. of Section 2
— Premium hereinabove.




DATED: January 7, 2008

RG/rg





2









 






No. 1650-0067






EXHIBIT C




LEBANON MUTUAL INSURANCE COMPANY

THIRD PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT




Section 1




LIMIT AND RETENTION 



A. The Company shall retain the first $5,000,000 of ultimate net loss, each loss occurrence. The
Reinsurer shall indemnify the Company for 95% of the amount by which the ultimate net loss exceeds
the Company’s retention, but the liability of the Reinsurer shall not exceed $1,425,000 (being 95%
of $1,500,000) ultimate net loss, each loss occurrence.



B. It is warranted that the Company shall retain net and unreinsured in any way, the remaining 5%
of excess ultimate net loss, each loss occurrence.




Section 2




PREMIUM



A. The premium for this Agreement shall be calculated at a rate of 0.71% of the Gross Net Written
Premium income accounted for by the Company during the term of this Agreement on all business the
subject matter of this Agreement, subject to a minimum premium of $41,000.



B. An annual deposit premium of $45,000 shall be paid to the Reinsurer by the Company in equal
quarterly installments of $11,250 payable on January 1, April 1, July 1 and October 1, 2008.



C. Within 60 days after December 31, 2008, the Company shall render to the Reinsurer a statement of
adjusted premium due hereon, calculated as provided in paragraph A. above, and any additional
premium due the Reinsurer or return premium due the Company shall be remitted promptly.



D. The term “Gross Net Written Premium Income” shall mean the Company’s gross written premiums less
return premiums and less premiums paid for reinsurance, if any, which inures to the benefit of the
Reinsurer under this Agreement.



E. 90% of the Company’s premiums under indivisible Farmowners Multiple Peril policies, 70% for
Businessowners policies and 90% of the Company’s premiums under Homeowners Multiple Peril policies
shall be allocated to the perils covered under this Agreement.




1









 





No. 1650-0067







Section 3




REINSTATEMENT 



A. In the event of the whole or any portion of the liability under this Agreement being exhausted
by loss, the amount so exhausted shall be automatically reinstated from the time of the occurrence
of the loss.



B. For each amount so reinstated, the Company agrees to pay an additional premium calculated at pro
rata of the premium paid hereunder as respects the fraction of the limit reinstated and 100% of the
annual premium regardless of the unexpired term of this Agreement. Nevertheless, the Reinsurer’s
liability hereunder shall never exceed $1,425,000 (being 95% of $1,500,000) with respect to each
loss occurrence, nor $2,850,000 (being 95% of $3,000,000) with respect to all loss occurrences
during the term of this Agreement.



C. lf, at the time of a loss claim hereunder, the adjusted premium is unknown, the
calculation for reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the adjusted premium is established in accordance with paragraph C. of Section 2
— Premium hereinabove.




DATED: January 7, 2008

RG/rg




2









 






No. 1650-0067






NUCLEAR INCIDENT EXCLUSION CLAUSE—PHYSICAL DAMAGE—REINSURANCE—NO. 2




     (1) This Reinsurance does not cover any loss or liability accruing to the Reassured,
directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or
Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.



     (2) Without in any way restricting the operation of paragraph (1) of this Clause, this
Reinsurance does not cover any loss or liability accruing to the Reassured, directly or
indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage
(including business interruption or consequential loss arising out of such Physical Damage) to:




	 	I.	 	Nuclear reactor power plants including all auxiliary property on the site, or
	 
	 	II.	 	Any other nuclear reactor installation, including laboratories handling radioactive
materials in connection with reactor installations, and “critical facilities” as such, or
	 
	 	III.	 	Installations for fabricating complete fuel elements or for processing substantial
quantities of “special nuclear material,” and for reprocessing, salvaging, chemically
separating, storing or disposing of “spent” nuclear fuel or waste materials, or
	 
	 	IV.	 	Installations other than those listed in paragraph (2) III above using substantial
quantities of radioactive isotopes or other products of nuclear fission.





     (3) Without in any way restricting the operations of paragraphs (1) and (2) hereof, this
Reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or other nuclear installation
and which normally would be insured therewith except that this paragraph (3) shall not operate:




(a) where Reassured does not have knowledge of such nuclear reactor power plant or
nuclear installation, or




(b) where said insurance contains a provision excluding coverage for damage to property
caused by or resulting from radioactive contamination, however caused. However on and
after 1st January 1960 this sub-paragraph (b) shall only apply provided the said
radioactive contamination exclusion provision has been approved by the Governmental
Authority having jurisdiction thereof.



     (4) Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof,
this Reinsurance does not cover any loss or liability by radioactive contamination accruing to
the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.



     (5) It is understood and agreed that this Clause shall not extend to risks using
radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured
to be the primary hazard.



     (6) The term “special nuclear material” shall have the meaning given it in the Atomic
Energy Act of 1954 or by any law amendatory thereof.



1









 





No. 1650-0067




     (7) Reassured to be sole judge of what constitutes:




(a) substantial quantities, and




(b) the extent of installation, plant or site.




Note.—Without in any way restricting the operation of paragraph (I) hereof, it is understood
and agreed that:




(a) all policies issued by the Reassured on or before 31st December 1957 shall be free
from the application of the other provisions of this Clause until expiry date or 31st
December 1960 whichever first occurs whereupon all the provisions of this Clause shall
apply,


(b) With respect to any risk located in Canada policies issued by the Reassured on or
before 31st December 1958 shall be free from the application of the other provisions of
this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all
the provisions of this Clause shall apply.



12/12/57 — 014:00034





2









 







No. 1650-0067





POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE




SECTION A

Excluding:





(a) All Business derived directly or indirectly from any Pool, Association or Syndicate which
maintains its own reinsurance facilities.




(b) Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the
purpose of insuring Property whether on a country-wide basis or in respect of designated
areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools
formed to provide coverage for Automobile Physical Damage.



SECTION B



It is agreed that business written by the Company for the same perils, which is known at the time
to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or
Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:





Industrial Risk Insurers; Associated Factory Mutuals; Improved Risk Mutuals.




Any Pool, Association or Syndicate formed for the purpose of writing Oil, Gas or
Petrochemical Plants and/or Oil or Gas Drilling Rigs.




United States Aircraft Insurance Group, Canadian Aircraft Insurance Group, Associated
Aviation Underwriters, American Aviation Underwriters.



Section B does not apply:




(a) Where the Total Insured Value over all interests of the risk in question is less than
$250,000,000.




(b) To interests traditionally underwritten as Inland Marine or Stock and/or Contents written
on a Blanket basis.




(c) To Contingent Business Interruption, except when the Company is aware that the key
location is known at the time to be insured in any Pool, Association or Syndicate named
above, other than as provided for under Section B (a).




(d) To risks as follows: Offices, Hotels, Apartments, Hospitals, Educational Establishments,
Public Utilities (other than Railroad Schedules) and Builders Risks on the classes of risks
specified in this subsection (d) only.



SECTION C



NEVERTHELESS the Reinsurers specifically agree that liability accruing to the Company from
its participation in





	 	(1)	 	The following so-called “Coastal Pools”

ALABAMA INSURANCE UNDERWRITING ASSOCIATION

FLORIDA WINDSTORM UNDERWRITING ASSOCIATION

LOUISIANA INSURANCE UNDERWRITING ASSOCIATION

MISSISSIPPI INSURANCE UNDERWRITING ASSOCIATION

NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION SOUTH CAROLINA WINDSTORM AND HAIL

UNDERWRITING ASSOCIATION

 TEXAS CATASTROPHE PROPERTY INSURANCE ASSOCIATION




1









 






No. 1650-0067










and




     (2) All “Fair Plan” Business,


for all perils otherwise protected hereunder shall not be excluded, except that this
reinsurance does not include any increase in such liability resulting from:





(i) The inability of any other participant in such “Coastal Pool” or “Fair Plan” to meet its
liability.




(ii) Any claim against such “Coastal Pool” or “Fair Plan,” or any participant therein,
including the Company, whether by way of subrogation or otherwise, brought by or on behalf or
any insolvency fund (as defined in the Insolvency Funds Exclusion Clause incorporated in this
Contract).



NOTES: Wherever used-therein the terms:




“Company” shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever
other term is used in the attached reinsurance contract to designate the reinsured
company or companies.



“Agreement” shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever
other term is used to designate the attached reinsurance document.



“Reinsurers” shall be understood to mean “Reinsurers,”



“Underwriters” or whatever other term is used in the attached reinsurance contract to
designate the reinsurer or reinsurers.




2









 






No. 1650-0067






INSOLVENCY FUND EXCLUSION



It is agreed that this Contract excludes all liability of the Company arising by contract,
operation of law, or otherwise, from its participation or membership, whether voluntary or
involuntary, in any insolvency fund. “Insolvency Fund” includes any guaranty fund, insolvency
fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or
governed, which provides for any assessment of or payment or assumption by the Company of part or
all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or
assigns, which has been declared by any competent authority to be insolvent, or which is
otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in
part.





1